RERA to pull down number of project launches in India in short term: Colliers

RERA should weed out speculators in the Indian property market and push it towards maturity. It is important for developers to prepare for changes.Ashish Kulshrestha | ET Bureau | Updated: September 18, 2016, 09:35 IST

HYDERABAD: New project launches are likely to witness a drop in the short term largely due to the fact that fewer projects will be ready for registration as developers will wait to see how the new norms pan out and how other projects fare with the Real Estate (Regulation & Development) Act (RERA) coming into force, said property consultant Colliers International in its latest report "Developers, get on Board".

Surabhi Arora, Senior Associate Director, Research, at Colliers India, said, "The key issue for developers is to prepare for the changes at the earliest as the Act applies to all existing projects as well. Based on our analysis, an improvement in project planning should help developers to avoid delays and manage project funds efficiently. Adopting the process early on will give developers an edge over their competitors and generate trust among buyers”.

One of the major impacts of the RERA is that currently, all major cities in India have high unsold inventory, so lower new project launches should ensure equilibrium in demand in the residential sector. However, this may lead to price rises in preferred and under-supplied mature markets, whereas over-supplied markets should be less impacted.

Over time, RERA should weed out speculators in the Indian property market and push it towards maturity. It is important for developers to prepare for the changes promptly since the Act applies to existing as well as future projects, said Colliers report.

An improved project planning will help developers avoid delays and manage project funds efficiently, said the report, adding that it would be prudent to hire planning professionals to take all steps to ensure timely project completion. Making such preparations early should give developers an edge over rivals and boost buyers’ trust.

Over the past two years, the real estate sector, especially the residential sector, has been reeling under pressure. This is the same sector which had witnessed a golden era in the past decade. However, currently, buyers are hesitating from buying despite the fact that there is a shortage of about 29 million houses in India. Buyers’ sentiment in the last two years has been at an all-time low primarily due to delay in delivery of projects, quality-related issues, escalated prices, and availability of limited recourse for a real estate consumer in case of conflicts with the developer.

“Buyers’ sentiment is already uplifted based on several expectations from the Act. We have started witnessing a lot of positivity among buyers now, which will eventually convert into demand," says Sumit Jain, National Director, Residential Services at Colliers India. "On the supply side, we expect a drop in new project launches in the short term because, developers may adopt a wait and watch approach. However, as all the major cities in India have high unsold inventory, so the drop in new project launches should help the residential sector to maintain supply-demand equilibrium.”